Supply shortages plague Canada's new cannabis marketplace

By Rob Gillies And Tracey Lindeman

October 31, 2018

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Supply shortages a continuing issueTijana Martin / THE CANADIAN PRESS

TORONTO — The name of the store is High North, but it might as well be named High and Dry because for all but about four hours of the first two weeks since marijuana was legalized in Canada, there was no pot to sell.

Trevor Tobin, one of the owners of the Labrador City shop in Newfoundland and Labrador, said they went 10 straight days without supply.

“The producers keep saying there will be some bumps in the road, but right now it’s not a bump in the road. It’s a big pothole,” he said.

His mother, Brenda Tobin, is a part-owner and said that after she tells customers there’s nothing to buy, “a lot of them are saying, ‘Oh, well. I guess it’s back to the black market.”‘

Legalization arrived Oct. 17, and Canada became the world’s largest national marketplace for so-called recreational marijuana. But for now, it’s a superlative in name only.

The first weeks have felt more like a soft opening with few retail outlets operating and rampant supply shortages. It’s not because Canada can’t produce enough cannabis products — licensing those producers has been slow, and the federal government is taking steps to speed up the process.

The provinces are handling the sales and most of the regulations. Reports from around the country are similarly discouraging when it comes to supply.

Quebec closed its government-run shops for three days this week because of a lack of pot and will continue to keep them shut Mondays through Wednesdays until availability is stabilized. Manitoba Liquor & Lotteries said it expects product shortages in both brick-and-mortar and online stores could last six months.

Ontario, Canada’s most populous province, won’t have any stores open until April at the earliest as the new conservative government writes regulations. Meantime, police have shut down at least 11 illegal dispensaries in the province.

Ontario residents who want to make legal purchases are flooding the online government store. At least 150,000 orders arrived in the first week, more than all other provinces combined, and the store can’t keep up.

Contributing to the delivery problem is a strike by workers at Canada Post, the nation’s postal service that handles online marijuana orders that are legal countrywide.

British Columbia, the third-largest province by population and a place that historically supplied of much of the country’s illegal weed, still has just one retail store.

Across Canada, people are returning to the black market. And some never left.

Corey Stone, a 32-year-old bar-restaurant manager in Montreal, and his friend were first in line at Quebec’s government-run cannabis store on Oct. 17, but he hasn’t been back because of the supply problems and has been getting his pot illegally.

In the capital of Ottawa, Ontario Capital Buds is one of the last holdouts after most of the illegal dispensaries in town closed on Oct. 16 so they could file for legal operating licenses. Business is booming — at 11 a.m. on a recent chilly, grey day, the waiting room was packed.

Blake Murchison, 62, was among the customers. He didn’t try visiting the government’s online store.

“Why? There’s a postal strike!” he laughed. “I’m not patient. It’s a matter of convenience, really. Or inconvenience.”

Devyn Stackhouse, a 30-year-old student at Ottawa’s Algonquin College, did go to the government website on Oct. 17 and placed two orders for five pre-rolled joints and a gram each of four cannabis strains. After waiting more than a week to get a delivery, Stackhouse went to an illegal dispensary.

“If (the government) were serious about access, serious about smothering the black market, then more resources would have been allocated to the OCS,” Stackhouse said, referring to the Ontario Cannabis Store website.

In Newfoundland, 25-year-old technician Elwood White has been to three legal shops and found little selection. He said the marijuana is more expensive but better quality.

“It definitely has better buzz,” he said.

Private and government retailers are dependent on licensed producers to send them products. But so far, of 132 marijuana producers approved by Health Canada, only 78 have sales licenses.

FSD Pharma Inc., an Ontario-based producer, received a cultivation license a year ago but still is waiting for a sales license.

“There is a lot of red tape,” said Dr. Raza Bokhari, co-chairman and interim chief executive of FSD Pharma. “Some of the obstacles are unnecessary. It is quite burdensome.”

Many that did get sales licenses are smaller operations, said Cam Battley, a top executive at Aurora Cannabis Inc., one of Canada’s large-scale producers.

Health Canada has hired 300 additional staff to evaluate applications for producers. Thierry Belair, a spokesman for Canada’s health minister, said the government has streamlined the licensing process and production is increasing.

“The implementation of the new legal regime that will better protect Canadians is not an event, it’s a process,” Belair said in an email.

Tammy Jarbeau, a spokeswoman for Health Canada, said it is important to note that Oct. 17 marked the launch of an entirely new regulated industry in Canada.

“As with any new industry where there is considerable consumer demand, we expect there may be periods where inventories of some products run low or, in some cases, run out,” Jarbeau said.

She added that given the longstanding illegal status of cannabis, there were no established benchmarks to determine which products would be in high demand and which would not, or to precisely estimate demand levels.

“As the overall supply chain gains experience in the Canadian marketplace, it is expected that such localized and product-specific shortages will become far fewer in number,” she said.

The rollout problems have been felt in Canada’s financial markets. Cannabis company stocks that soared as legalization arrived have been hammered since.

Aurora’s stock price lost about half its value since peaking at $15.16 per share Canadian (US $11.68), but Battley remains optimistic.

He acknowledged some companies with sales licenses stumbled getting their products to the provinces amid demand that topped expectations. But Battley said high demand is a good thing and customers who have gotten what they wanted are satisfied.

“A lot of people have been purchasing nondescript cannabis in a baggy, and who knows how that was cultivated.” he said. “Once they get ahold of professionally cultivated cannabis and value-added products like the pre-rolls and capsules, they are pretty darned pleased.”

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